Delhi District Court
M/S Mahalaxmi Fabrics vs Krishna Traders on 5 May, 2025
In The Court of Sh. Divyam Lila, Municipal Magistrate, East, Delhi
JUDGEMENT
DLET020046992020 CC NI ACT 1758/2020 Presented on : 14-08-2020 Registered on : 14-08-2020 Decided on : 05-05-2025 Duration : 4 years, 8 months, 22 days (Complainant):
M/S Mahalaxmi Fabrics Through Its Proprietor Mr. Santosh Kumar Prajapat Registered Office At- 5963, Subhash Mohalla, Shivaji Gali Raghubarapura, Gandhi Nagar New Delhi-110031 Versus (Accused) Krishna Traders Through Its Proprietor Sh. Narendra Gulati Office At- Plot No. 295, Swarn Park, Mundka New Delhi-110041 R/o - A 1/264, Paschim Vihar, Delhi Adv. for appearing for Complainant: Sh. Vishvendra Verma Adv. for appearing for the Accused: Ms Jasmine Detwani DIVYAM Offence punishable under :138 of Negotiable Instruments Act, LILA Final Order : Acquittal, under Section 138 NI Act Digitally signed by DIVYAM LILA Location: Court Room no.
12, KKD, East, Delhi
Date: 2025.05.05 16:55:27
-:Index of Judgment:- +0530
1. Introduction:-.................................................................................................. 2
2. Brief Facts of the Case:-................................................................................. 2
3. Notice Framed on the Accused and Plea of the Accused.............................3
4. Issues for Determination:............................................................................... 3
5. Evidence on Record........................................................................................ 3
6. Legal Position:.................................................................................................6
7. Arguments of the parties:...............................................................................9
8. Analysis and Findings:................................................................................. 13
10. Conclusion and Reason for decision:........................................................ 23
11. Order:...........................................................................................................24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi
1. Introduction:-
a. This judgement arises out of a complaint filed under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "NI Act") by the complainant against the accused for dishonour of cheque based on the commercial liability as debt.
2. Brief Facts of the Case:-
a. The case of the complainant, Sh. Santosh Kumar Prajapat, in brief is that M/s Mahalaxmi Fabrics, a proprietorship firm, is represented by the complainant. The complaint is filed under Sections 138, against the accused, Sh. Narendra Gulati, Proprietor of Krishna Traders. The complainant alleges that complainant had handed over the material of Rs. 10,00,000/- to the accused, and accused had issued duly filled signed cheques and given handwritten pro-notes, and liability on plain papers.
b. The complainant alleged that the accused issued a cheque cheque bearing No. 077189, dated 03-02-2020, for Rs. 10,00,000/-, drawn on Union Bank of India, Mundka Branch, (hereinafter referred to as "cheque in question") allegedly issued by the accused in discharge of a legally enforceable debt. The cheque was dishonored with the remark "Funds Insufficient" vide return memo dated 19.03.2020. The complainant issued legal notice dated 28.05.2020 , which was sent to the accused demanding the payment, yet no payment was received.
c. Hence, the cognizance in the present matter was taken, and the accused was summoned for the purpose of trial.
CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 2/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi
3. Notice Framed on the Accused and Plea of the Accused a. The accused was served notice under Section 251 Cr.P.C and pleaded "not guilty".
b. The accused admitted that the cheque in question was signed by him, pertaining to an account maintained by him. The accused also admits issuing the cheque to the complainant.
c. The accused denies any liability towards the complainant, asserting that the cheque was issued in 2017 as a security for business dealings and was misused by the complainant. He claims that his factory caught fire and he stopped his business. The accused denies receiving the legal notice. The accused also denied filling the particulars on the cheque in question.
4. Issues for Determination:
a. The cheque was issued in discharge of a legally enforceable debt or liability.?
b. The cheque was presented within the period of validity of three months?.
c. The cheque was dishonoured for insufficiency of funds.? d. A legal notice was duly served.?
e. The accused failed to make payment within the prescribed period. f. The accused has successfully rebutted the statutory presumption under Sections 118 and 139 of the NI Act.?
5. Evidence on Record a. Complainant's Evidence: The complainant, Santosh Kumar Prajapat, appeared as CW1 and testified that he is the proprietor of M/s Mahalaxmi Fabrics, a firm engaged in the garment business. He claimed to have had a business relationship with the accused, Narender Gulati, the proprietor of Krishna Traders, since 2017, involving the supply of garments and job work for washing the CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 3/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi garments. According to CW1, goods worth approximately Rs. 25 lakh were supplied to the accused, with Rs. 13 lakh of the total being supplied by him personally. To settle part of the outstanding dues, the accused allegedly issued cheque in question. Along with the cheque, the accused executed a promissory note, acknowledging the liability and committing to repay the amount. The cheque in question was dishonoured. In cross-examination, CW1 admitted that he did not provide any documentary evidence proving that he is the proprietor of M/s Mahalaxmi Fabrics. He also acknowledged that no invoices, GST records, or delivery receipts were filed to substantiate the supply of goods to the accused. Moreover, the delivery challans presented in court did not have the accused's signature or acknowledgment, and he explained that these were simply informal documents. CW1 also faced questioning regarding the promissory note, admitting that he could not recall who filled in the details of the cheque or whether the accused's name appeared on the promissory note. When asked about further documents supporting the claim of Rs. 25 lakh worth of goods supplied, CW1 explained that he could not locate the relevant records. He also testified that the promissory note was executed on the same day as the cheque, but could not provide a clear explanation of the circumstances surrounding its preparation or the date of the same. CW1 denied the suggestions of the accused that the cheque was issued as security for job work and maintained that the promissory note was genuine and not forged. b. Statement of accused: In his statement recorded under Section 313 Cr.P.C., confirmed that the signature on the cheque belonged to him, and pertained to the account maintained by him. The accused denied issuing the cheque to Santosh Kumar Prajapati, while CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 4/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi stating that the cheque was issued to the complainant in 2019. The accused denied receiving legal notice while claiming that the address on legal notice belonged to his son. The accused also claimed that he gave the cheque to his son in 2017 and that same was given by his son further.
c. Defence Evidence: In his defense evidence, the accused, Narender Gulati, testified that his business relationship with the complainant, M/s Mahalaxmi Fabrics, existed from 2014 to 2018 when his factory was operational. The accused stated that he had a working arrangement with the complainant for job work, where the complainant sent clothing material for washing at a rate of Rs. 30 to Rs. 40 per piece. He further explained that he had been given material by the complainant for job work and, in return, he had provided a security cheque to the complainant in 2017. According to the accused, the cheque in question was issued as security for the job work and was not related to any loan or debt. The accused insisted that there was no formal loan or financial agreement with the complainant. The accused also relied upon his bank statements for the period from 2017 to 2020 Ex. DW-1/A, which he contended proved that the cheque had been given as a security in connection with business transactions, not for a loan. The accused claimed that the complainant had exaggerated the amounts in the delivery challans and fabricated documents regarding the supply of goods. He stated that the challenges presented by the complainant were not supported by proper records, such as GST records, e-way bills, or any receipts acknowledging the receipt of goods. The accused emphasized that he had received payments for his job work from the complainant via bank transfers, which were supported by proper records and tax invoices. However, he insisted that he had CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 5/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi not received any material for a loan or purchased any goods. He also asserted that the complainant had misused the cheque by presenting it for payment when no financial liability existed. He argued that the cheque was never returned after job work was completed, as was typical business practice, and the issue arose when the complainant misused it in 2020. Regarding the promissory note, the accused denied signing the document. He claimed that his signature was not on the note, and he did not know how it had been prepared or who had filled out the details. He asserted that the loan mentioned in the promissory note had not been given by him, and he believed the note to be forged. In cross-examination, the accused confirmed that he had not filed a police complaint regarding the alleged forgery of the promissory note, and explained that his factory had suffered a fire which had led to the loss of certain documents. He denied having any formal business transaction with the complainant that would result in an outstanding debt, especially in the context of the cheque presented in 2020. He reiterated that the cheque was simply a security for the job work and was not intended for payment of any debt. The accused maintained that all material received from the complainant had been returned after job work, and no outstanding amount was due.
6. Legal Position:
a. In order to constitute an offence under Section 138 of the Negotiable Instruments Act, 1881, the following essential elements must be satisfied as per the judgement in Kusum Ingots & Alloys Ltd. Vs. Pennar Peterson Securities Ltd. AIR 2000 SC 954 ,both in the complaint and the evidence presented by the complainant:
CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 6/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi i. Drawing of the Cheque: The accused must have drawn a cheque on an account maintained by them, for the payment of a legally enforceable debt or liability to another person. ii. Timely Presentation: The cheque must be presented to the bank for payment within three months from the date on which it was drawn, or within the period of its validity, whichever is earlier.
iii. Dishonour of the Cheque: The cheque must be dishonoured by the bank due to either insufficient funds in the account or because the amount exceeds the arrangement made with the bank.
iv. Notice of Demand: The payee or holder of the cheque must issue a written demand for payment to the drawer, within 30 days of receiving information from the bank regarding the dishonour.
v. Failure to Pay: The drawer must fail to make payment within 15 days of receiving the notice of demand.
b. Additionally, the provisions of Sections 139 and 118 of the Act further strengthen the case for the complainant. Section 139 creates a presumption in favour of the holder of the cheque, mandating that the court shall presume, unless proven otherwise, that the cheque was issued for the discharge of a debt or other liability. Section 118, on the other hand, provides that there is a presumption that every negotiable instrument, including a cheque, was made for consideration, and that it was transferred for consideration. c. In the case of Basalingappa v. Mudibasappa (2019) 5 SCC 418;, the Hon'ble Supreme Court has laid down that once the execution of the cheque is admitted, Section 139 imposes a rebuttable presumption in favour of the complainant, establishing that the CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 7/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi cheque was issued for the discharge of a debt or liability. The presumption is rebuttable and the accused has the opportunity to raise a probable defence. The standard of proof for rebutting this presumption is based on the preponderance of probabilities. d. The court further held that it is not mandatory for the accused to enter the witness box to prove their defence. They may rely on the evidence presented by the complainant or any other available materials. The onus to rebut the presumption lies on the accused, but it is important to note that this is an evidentiary burden, not a persuasive one.
e. Thus, Section 138 operates on the principle of reverse onus of proof - once the complainant proves the essential elements of dishonour, the burden shifts to the accused to raise a plausible defence. The presumption of guilt is strong, but not irrebuttable, and the accused is entitled to challenge it through a preponderance of evidence.
f. In the backdrop of legal position as enunciated above, it is to be examined by this Court that whether the accused on a scale of preponderance of probabilities has been able to rebut the presumption which has been raised against him and in favour of the complainant, or has been able to demolish the case of the complainant to such extent so as to shift the onus placed upon the accused again on the complainant. As held by Hon'ble Supreme Court of India in case of Kumar Exports vs Sharma Carpets (2009) 2 SCC 513, the accused can either prove the non−existence of the consideration and debt by direct evidence or by bringing on record such facts and circumstances, upon consideration of which, the Court may either believe that the consideration and debt either did not exist or their non−existence was so probable that a prudent CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 8/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi man may act upon the plea that they did not exist. If the Court comes to the conclusion that the accused has not been able to rebut the presumption raised against him by failing to bring on record direct evidence or by even failing to sufficiently perforate the case of the complainant, the complainant is entitled to a decision in his favour.
7. Arguments of the parties:
a. Arguments by Ld. Counsel for the Complainant : The learned counsel for the complainant submitted that the case is squarely covered under Section 138 of the Negotiable Instruments Act, 1881, and the accused is liable for the dishonour of the cheque. The key arguments advanced by the counsel urged the court to convict the accused, are as follows:
i. Issuance of Cheque for Legally Enforceable Debt and presumption: The complainant asserts that the accused issued cheque in question to discharge a legally enforceable debt arising from the supply of clothing material worth approximately Rs. 25,00,000/-. The complainant relies on the presumption under Section 139 of the NI Act, which assumes that a cheque is issued for a legally enforceable debt unless the accused proves otherwise. The burden lies on the accused to rebut this presumption, as held in Rangappa v. Sri Mohan (2010) 11 SCC 441.
ii. Supporting Documents to Prove the Debt: The complainant produced the original cheque confirming its issuance by the accused, who admitted signing it. A promissory note was submitted to establish the accused's acknowledgment of the CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 9/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi debt. CW-1 testified that it was executed on the same day as the cheque, in the presence of witnesses like Parsa Ram and a neighbor, Sunny. Delivery challans were filed to prove the supply of goods. CW-1 claimed these challans detail the materials supplied, though he admitted they lack the accused's acknowledgment. Another document Mark CW1/9, colly 2 pages was submitted to show details of supplied materials. The complainant argues that these documents, coupled with the cheque, sufficiently prove the debt, and the accused's failure to dispute the transaction during business dealings strengthens the case. iii. Rebuttal of Accused's Defense: The complainant challenges the accused's claim that the cheque was a security issued in 2017, arguing that the cheque's date and presentation in 2020 contradict this assertion. The accused's admission of signing the cheque undermines his claim of misuse. The accused's denial of the promissory note's signatures is baseless, as CW-1 testified that it was executed in the presence of witnesses. The complainant argues that the accused's failure to seek forensic analysis or file a police complaint for alleged forgery weakens his defense. He further argued that the accused's claim of a factory fire destroying records is unsubstantiated, as no evidence (e.g., fire department reports, insurance claims) was produced. The complainant contends that this is a fabricated excuse to evade liability. The accused did not disprove the loan or produce evidence to support his innocence, failing to rebut the presumption under Section 139.
CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 10/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi iv. Testimony of the complainant consistent: The complainant's testimony was consistent, and the accused could not impeach it by way of cross examination and producing any evidence. b. Arguments by Ld. Counsel for the Accused : The learned counsel for the accused vehemently argued that the complainant has failed to prove the existence of a legally enforceable debt, and the case is based on a fabricated narrative to extort money. The key arguments advanced by the counsel, while praying for the acquittal of the accused, are as follows:
i. Cheque Issued as Security, Not for Debt: The accused contends that the cheque was issued in 2017 as a security for business dealings involving job work (washing clothes) at Rs. 30-40 per piece, not to discharge any debt. This is a common practice in the garments industry. The cheque was blank when issued, with "other particulars not filled by me," as per the notice response, and was misused by the complainant in 2020. Relying on M.S. Narayana Menon v. State of Kerala (2006) 6 SCC 39, the accused argues that he need only raise a preponderance of probabilities to rebut the presumption under Section 139 of the NI Act, which he has done by asserting the cheque's security purpose. ii. No Legally Enforceable Debt: The accused denies any outstanding liability towards the complainant, claiming all payments were settled during their business relationship from 2014 to 2018. The complainant's claim of supplying goods worth Rs. 25,00,000/- is unsubstantiated, as no invoices, GST records, or E-Way bills were produced. The accused argues that such high-value transactions require mandatory GST compliance and E-Way bills under GST CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 11/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi laws, which the complainant failed to provide. The delivery challans (Mark CW1/8) are photocopies, lack acknowledgment, and are "wrong, exaggerated, and fabricated," as stated in DW-1's testimony. The complainant's failure to produce original challan books or call witnesses to verify delivery renders them unreliable. iii. Discrepancies in Promissory Note: The accused disputes the promissory note's authenticity, denying his signatures at points A, B, and C (DW-1 testimony). He argues that the note is fabricated, as evidenced by the absence of a date undermines its legal validity, the note names the complainant as the proprietor of Krishna Traders, a critical discrepancy unexplained by CW-1 and the inclusion of an interest clause without explanation is irregular for a commercial document. Further, The legal notice omits reference to the promissory note, despite CW-1's claim that it was executed with the cheque, suggesting it was introduced later. The complainant's failure to call witnesses like Parsa Ram, who allegedly signed the note, or seek forensic analysis of the signatures strengthens the accused's forgery claim. iv. Complainant's Evidentiary Failures: The accused highlights the complainant's failure to produce critical evidence. Despite CW-1's claim of raising invoices, none were filed, even after promising to do so, and hence adverse inference must be drawn against the complainant. The complainant produced no bank statements or ledger accounts to show transactions or the accused's liability and the complainant did not call witnesses like Parsa Ram or Sunny to CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 12/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi corroborate the transaction or promissory note's execution, raising an adverse inference.
v. Factory Fire and Business Closure: The accused claims his factory caught fire , destroying records and ending business relations with the complainant in 2018. This explains the absence of job work records or proof of goods returned. vi. Vague and Contradictory Testimony: The complainant's vague and contradictory claims indicate deliberate suppression of facts. The accused claimed that the complainant could give consistent testimony on the quantum of goods supplied.
vii. Probable Defense of Cheque Misuse: The accused consistently denied the liability from the complainant, stating the cheque was given to the complainant as security as a part of commercial practice.
8. Analysis and Findings:
a. Issue 1 - Issuance of Cheque: This ingredient pertains to the issuance of the cheque in question itself. The Accused, in his notice of accusation has admitted his signature on the cheque in question and that the cheque has been drawn on the account of the Accused. The accused has admitted issuance of the cheque to the complainant albeit for security for a commercial transaction at the time of commencement of business. Having considered the defence of the accused, and the admission of signing the cheque and issuing the same to the complainant, the plea of accused that the particulars of the cheque in question were not filled by him is of no help; as the signature of the accused on the cheque is not disputed. Reliance CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 13/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi can be placed, at this juncture, wherein Hon'ble High Court of Delhi in Ravi Chopra Vs. State and Anr. (2008) 102DRJ147, held:
"Section 20 NI Act talks of "inchoate stamped instruments" and states that if a person signs and delivers a paper stamped in accordance with the law and "either wholly blank or have written thereon an incomplete negotiable instrument" such person thereby gives prima facie authority to the holder thereof "to make or complete as the case may be upon it, a negotiable instrument for any amount specified therein and not exceeding the amount covered by the stamp." "A collective reading of the above provisions shows that even under the scheme of the NI Act it is possible for the drawer of a cheque to give a blank cheque signed by him to the payee and consent either impliedly or expressly to the said cheque being filled up at a subsequent point in time and presented for payment by the drawee. There is no provision in the NI Act which defines the difference in the handwriting or the ink pertaining to the material particulars filled up in comparison with the signature thereon as constituting a 'material alteration' for the pur- poses of Section 87 NI Act. What however is essential is that the cheque must have been signed by the drawer." Further, in Bir singh Vs. Mukesh Kumar, (2019) 4 SCC 197 it was held that:-"It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted." Hence, In the present case, Prima facie the ingredient that the cheque was issued to the complainant has been satisfied as the accused admitted his signature on the cheque and the account being maintained by him. Having admitted the basic ingredient, the presumption is drawn against the accused and now CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 14/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi the accused would have to prove that the cheque in question was not issued by him; by way of rebuttal of the presumption drawn against him. Whether the accused was able to successfully rebut the adverse presumption is dealt in detail in the issue no. 6; However, the issue no. 1 is decided in favour of the complainant and the presumption is drawn against the accused. b. Issue 2 - Presentation within Validity: This ingredient stands satisfied on a bare perusal of the cheque in question Ex. CW1/3 and the return memo Ex. CW1/4 being presented within the period of validity. The cheque is also not dishonoured with the remark "instrument stale"; as the cheque has been dishonoured with a return memo noting the reason for return as "Funds Insufficient".
The defence has led no evidence to contradict the same and hence, this ingredient stands fulfilled as against the accused. Hence, this issue is also decided in favour of the complainant and the cheque has been proved to be dishonoured within the period of validity. c. Issue 3 - Dishonour of Cheque: The bank return memo Ex. CW1/4 records state that the cheque in question has been returned dishonoured for the reason "Funds Insufficient". The defence has led no evidence to contradict the same and hence, this ingredient also stands satisfied as against the Accused. Hence, this issue is also decided in favour of the complainant and the cheque has been proved to be dishonoured.
d. Issue 4 - Legal Notice: Service of the legal notice is the legal fiction which constitutes the major ingredient of the offence u/s-138 NI Act. The objective of serving legal demand notice to the Accused before filing the case is to allow the accused to make the payment. As regards the service of legal demand notice, the Complainant has sent the same to the accused. That the Accused CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 15/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi has in his notice of accusation u/s 251 Cr.P.C denied receiving the legal demand notice and also in the statement of Accused u/s 313 Cr.P.C read with Sec-281 Cr.P.C, however, the accused admitted the address mentioned on legal notice is correct being belonging to the son of the accused. The accused has also not led any positive evidence to prove that the legal notice was not served on him, nor any evidence to prove that the address on the legal notice is correct. The Sec. 27 of the general clauses act provides for the presumption for the service. At this stage, reliance can be placed on the judgement of the Hon'ble Supreme Court of India in C.C. Alavi Haji Vs. Palapetty Muhammed, 2007 (6) SCC 555 while discussing the true intent behind the service of legal demand notice as a precursor to the launch of prosecution held that the service of summons of the court is opportunity enough for the accused to pay the cheque amount and evade prosecution and any accused who fails to pay the amount within 15 days of the service of summons, clearly cannot protect himself/herself behind the technical demand of non-service of legal notice. Thus, in absence of any evidence against the presumption of service and admission of the accused with respect to address being correct, this issue is also decided in favour of the complainant and the service of legal notice has been proved.
e. Issue 5 - Non-Payment within 15 Days: In the present case, after the issue no. 4 is against the accused, the case of the accused is that he does not have any liability towards the complainant and his cheque was misused. Hence, it is an admitted position that no payment for the cheque in question was made and thus this ingredient of non-payment within 15 days also stands satisfied. Hence, this issue is also decided in favour of the complainant and CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 16/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi the cheque has been proved to be not paid by the accused despite service of notice.
9. Issue 6 : Defence of the Accused and Rebuttal of Presumption: The above ingredients being satisfied, the court would have to look at the defence brought out by the accused by way of cross examination of the complainant's evidence and the rebuttal by way of defence evidence. In the present case, the accused had made following attempts towards rebuttal of the statutory presumption against him; and with the following observations, it is held that the issue no. 6 is decided against the complainant and in favour of the accused:
a. Failure to prove the transaction of sale of goods: The complainant alleges supplying clothing material worth Rs. 25,00,000/-, of which Rs. 10,00,000/- was to be paid via the cheque. However, the complainant failed to prove the said transaction, and the findings for the same is summarised as below:
i. Invoices or Bills of the goods not produced: No invoices were produced to substantiate this claim, despite CW-1's testimony that invoices were raised for supplied goods. During cross-examination, CW-1 promised to produce invoices on the next hearing but failed to do so, stating he "could not find the documents." This failure is fatal, and adverse inference has to be drawn by the court under section 114 (g) of Indian evidence act where it is stated that "114.
Court may presume the existence of certain facts. : The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 17/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi particular case. The Court may presume -(g) that evidence which could be and is not produced would, if produced, be unfavorable to the person who withholds it". The absence of invoices leaves the court without any documentary basis to verify the quantity, value, or nature of the alleged goods supplied. The complainant's vague assertion of a Rs. 13,00,000/- supply by himself and Rs. 12,00,000/- by his nephew lacks specificity and corroboration. The lack of invoices creates a significant evidentiary gap, undermining the claim of a legally enforceable debt.
ii. Absence of Proof of Transport or Delivery: The complainant failed to produce E-Way bills, transport receipts, or any other documents to prove the movement of goods worth Rs. 25,00,000/-. The absence of such records for a high-value transaction raises serious doubts about the supply's occurrence. The delivery challans Mark CW1/8 are photocopies, not originals, and lack any acknowledgment or signature from the accused or his representative. CW-1 admitted in cross-examination that "there is no receiving on the alleged documents Mark CW1/8." The complainant did not produce the originals as primary evidence, when the accused denied the validity of the same. Without proof of delivery or transport, the complainant's claim that goods were supplied remains unsubstantiated.
iii. Lack of Receipt or Acknowledgement of Goods: The delivery challans (Mark CW1/8) do not bear the accused's signature or any acknowledgment of receipt, rendering them unreliable as evidence of goods delivery. CW-1's testimony that "further details are not mentioned" because the goods CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 18/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi were not returned is unconvincing, as it does not explain the absence of initial acknowledgment. The accused disputes the challans as "wrong, exaggerated, and fabricated," noting their lack of originals or GST compliance. The complainant's failure to produce original challan books or call witnesses to verify delivery further weakens their probative value. The lack of signed challans or delivery receipts creates a reasonable doubt about the transaction's existence.
iv. Unreliability of Delivery Challans (Mark CW1/8): The delivery challans Mark CW1/8 are photocopies, not originals, and were produced late during CW-1's cross-examination. CW-1 admitted they lack acknowledgment, stating, "It is correct that there is no receiving on the alleged documents Mark CW1/8." The complainant failed to produce original challan books or call witnesses to verify their authenticity or the delivery of goods. The absence of originals violates Section 64 of the Indian Evidence Act, 1872, which requires primary evidence for documents relied upon in court, unless secondary evidence is admissible under Section 65. The complainant did not establish grounds for admitting photocopies, rendering the challans inadmissible. Even if admissible, the lack of acknowledgment or corroborative evidence makes the challans unreliable.
v. Non-Production of Bank Statements or Account Records: The complainant did not produce bank statements, ledger accounts, or any financial records to demonstrate transactions between the parties or the accused's alleged CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 19/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi liability. CW-1 admitted in cross-examination that "I do not have any statement of account of Krishna Traders." In a commercial transaction of Rs. 25,00,000/-, it is reasonable to expect financial records showing payments, advances, or outstanding dues. The absence of such records undermines the complainant's claim that the accused owed Rs. 10,00,000/-.
vi. Lack of Corroborative Witnesses: The complainant relied solely on his testimony, without examining any witnesses to corroborate the transaction, delivery, or execution of documents.
b. Inability to Specify the Occasion of Liability: CW-1 could not explain the specific occasion or transaction for which the accused was liable to pay Rs. 10,00,000/-. The testimony vaguely references a supply of goods worth Rs. 25,00,000/-, with Rs. 13,00,000/- attributed to the complainant and Rs. 12,00,000/- to his nephew, without detailing the nature, date, or terms of the transaction. The complainant did not show prior similar transaction wherein he sold goods to the accused. CW-1 claimed a settlement where the accused agreed to pay Rs. 10,00,000/-, but no written agreement, correspondence, or acknowledgment was produced. The complainant's assertion that "no formal document was prepared qua the settlement" further erodes credibility. c. Promissory Note Ex CW 1/1 not proved: The complainant heavily relies on the promissory note (Ex. CW1/1) to prove the debt, however, the complainant is unable to prove the same as observed:
i. Lack of Corroborative Witnesses: The complainant/ CW-1 mentioned that Parsa Ram and a neighbor, Sunny, were CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 20/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi present when the promissory note was executed, but neither was called as a witness. During cross-examination, CW-1 explicitly stated, "I do not wish to make Parsa Ram as witness," despite the accused denying his signatures on the promissory note. This failure to call a key witness undermines the complainant's case, and raises an adverse inference, especially when in contrast the accused has completely denied the signatures and the existence of the same.
ii. Discrepancies and Unreliability of the Promissory Note:
This document suffers from multiple infirmities; The P-note lacks a date, which is unusual for a legal document meant to record a financial obligation, undermining its authenticity. The P-note incorrectly names the complainant, Sh. Santosh Kumar Prajapat, as the proprietor of Krishna Traders (the accused's firm), a critical error that CW-1 failed to explain. This discrepancy suggests the document may be fabricated or erroneously prepared.
iii. The accused denied his signatures: The accused denies his signatures at points A, B, and C on Ex. CW1/1. During cross-examination, he reiterated, "My signatures are not present at point A, B, C." The complainant did not seek forensic analysis to verify the signatures, despite the accused's challenge.
iv. Non-Mention in Legal Notice: The legal notice does not reference the promissory note, despite CW-1's claim that it was executed on the same day as the cheque. This omission suggests the note may have been introduced later, supporting the accused's forgery allegation.
CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 21/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi d. Accused's Probable Defense: The accused denied the commercial transaction, asserting that the cheque in question was given to the complainant as security. The accused's burden is to raise a preponderance of probabilities, not to prove his case beyond reasonable doubt. The accused's defense is plausible, given the complainant's failure to produce invoices, transport documents, or financial records. The promissory note's discrepancies and the legal notice's omission of the note further support the accused's claim of misuse. The accused supported his defense with: i. Denial of signature and execution of Promissory Note:
The accused's denial of signatures on the promissory note and dispute over the challans' authenticity are bolstered by the complainant's evidentiary gaps. Although, The accused did not produce job work records, proof of goods returned, or evidence of the factory fire.
ii. Consistent Defence of Security Cheque: The accused consistently maintained his defence across his response to the notice under Section 251 Cr.P.C., statement under Section 313 Cr.P.C., and defence evidence as DW-1, that the accused asserts the cheque was issued in 2017 as a security for job work, not a debt, and was misused by the complainant. He claims business relations ended in 2018 after a factory fire, and all payments were settled. The accused produced bank statements Ex. DW-1/A) to show no outstanding liability. While not conclusive, they support his claim of no ongoing financial obligation. This narrative is plausible, given the admitted relationship between the accused and the complainant, and practise of obtaining blank CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 22/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi security cheques, coupled with failure of the complainant to lead supporting evidence.
iii. Lack of Action Not Fatal: The complainant argued that the accused's failure to file a police complaint or seek the cheque's return negates his claim of misuse. Given the now shifted burden of the complainant to prove the debt, the accused's lack of prior legal action does not undermine his probable defence. Although the proactive action by the accused would have helped him further in the case, the absence of such action does not prove fatal to his defense. iv. Preponderance of Probabilities: The accused's defence meets the standard of preponderance of probabilities required under Section 139. His consistent testimony, corroborated by lack of evidence by the complainant's evidentiary gaps, creates a reasonable doubt about the cheque's purpose.
10.Conclusion and Reason for decision:
a. The Issue no. 1, 2, 3, 4 and 5 were decided in favour of the complainant and the presumption was drawn against the accused. However, In the issue no. 6, The accused was tacitly able to rebut the presumption drawn against him by fracturing the case of the complainant by rigorous cross examination to expose the latent defects, whereas the complainant has failed to discharge the burden of proving that the accused owed a legally enforceable debt of Rs.10,00,000/- or that the cheque was issued to discharge such a liability. The issue no. 6 is proved against the complainant, and the following deficiencies are fatal to the complainant's case:
i. No documentary evidence such as invoices, bills, etc. CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 23/ 24 In the court of Sh. Divyam Lila, MM/JMFC, East district, Karkardooma courts, Delhi ii. Lack of proof of delivery of goods.
iii. Non-examination of material witnesses.
iv. Inability to prove the promissory note b. The accused is able to cross the threshold of preponderance of probabilities to prove his innocence and the complainant is unable to shift back the burden. Hence, the benefit of doubt has to be extended to the accused, and thus the case of the complainant does not survive the rigours of trial, despite having statutory presumption against the accused.
11.Order:
a. The accused Narender Gulati has raised a probable defence and successfully rebutted the presumption under Sections 118 and 139 of the NI Act. The complainant has failed to prove his case beyond reasonable doubt. Hence, the accused is acquitted of the offence under Section 138 NI Act.
b. The bail bonds of the accused and the sureties (in any), that are already filed in the court for the purpose of bail, are retained for the purpose of section 437 A Cr.P.C for the period of six months from today.
c. The signed copy of the judgement be uploaded on the CIS immediately.
d. Let the file be consigned to the record room, after due compliance. e. Pronounced in open court and in presence of both the parties/ or their Counsels. DIVYAM LILA (DIVYAM LILA) Digitally signed by Municipal Magistrate, East District DIVYAM LILA Location: Court Room no. Karkardooma Court/Delhi 12, KKD, East, Delhi Date: 2025.05.05 Date: 05.05.2025 16:55:38 +0530 ___________________________end of the document_____________________ CC NI ACT 1758/2020 M/s Mahalaxmi Fabrics vs Krishna traders page 24/ 24